Congress Pre-Budget Submission Budget 2020 - Building a Shared and Sustainable Future - Autumn 2019 - Irish ...
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Congress
Pre-Budget
Submission
Budget 2020 –
Building a Shared and
Sustainable Future
Autumn 2019How to raise
New Revenue of €970m
Reforms to Capital
Acquisitions Tax and
to the system of Tax
Raise Excise
Expenditures
tax on diesel
€100m €165m
Raise
employers’ PRSI Introduce tax on
to 13.75% on excess packaging
of incomes above and single
€100,000 and raise PRSI -use plastics
contributions for Class
S contributors €10m
€225m
Introduce a tax on
Net Wealth
€375m
Raise Excise
Raise tax on
on-line tobacco
betting tax
€20m €50m
Raise VRT
and Motor Tax on the
most environmentally
Reintroduce tax damaging cars
relief for trade union
subscriptions €50m
-€25mNew
Expenditure €2.97b
Funding for provision Climate Emergency and Just
of A rated public and Transition (1st year): greater funding
affordable housing for retrofitting; public transport;
(1st year) R&D/innovation funds for green
technology, and funds to support
€830m workers transitioning to a low
carbon economy.
€400m
Health: Implementation of
health reforms, increase
investment in primary and
€2.97b
community health, and to Increase Overseas
implement Sláintecare Development Aid
€600m €120m
Offset the loss of the
transition pension
€25m Introduce a
Brexit Adjustment
Assistance Fund (a
once-off payment
Education/children: Increase Increase social welfare contingent on the
social investment in early payments, including reform occurrence of Brexit)1
years care and education of eligibility thresholds
(ECCE) and in education for the Working Family €160m
Payment (formerly Family
€500m Income Supplement).
€335m
1 As a once-off payment, this measure would not affect the structural deficit in future years.Congress
Pre-Budget
Submission
Budget 2020 –
Building a Shared and
Sustainable Future
Autumn 20192
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Contents
Foreword 3
1. Fiscal Context and Congress Position 4
Public Spending and the Public Finances 4
Broad Proposals 6
2. Supporting Workers and Families 8
Raising the Minimum Wage 8
Enhancing the Social Wage 10
Ensuring Social Security 11
Pensions 12
Extension of Social Welfare Benefits to the Self-Employed 13
Bogus Self-Employment – Lost Revenue to the State 15
Encouraging Collective Bargaining and Trade Union Membership 16
Maintaining the Flat Rate Expenses System 17
Brexit – Maximising Sustainable Employment 18
Investment in Public Housing 20
Investment in Health 21
Investment in Long-term Care 22
Investment in Early Years Care and Education 23
Investment in Education 24
Supporting People in the Global South 26
3. Climate Change and the Just Transition 27
A Green Strategy 28
4. Increasing Revenue for European Public Services 30
Environmental Taxes 30
Taxes on Capital 30
Employers’ PRSI 31
On-line Betting Tax 31
Tobacco 313
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Foreword
Ireland has a number of emerging challenges as we approach a
new decade – these include Brexit; climate chaos; precarious work
and inequality; housing and homelessness emergencies; a two-
tier health system; the fiscal implications of a growing and ageing
population, and the fragility of an industrial strategy based on
tax-sensitive US multinationals. In particular, the risk of a no-deal
Brexit has increased since the start of this year and may now take
place at the end of October.
Now is the time to invest in our increasing the stock of homes in well-
people, our public services, and our designed, sustainable neighbourhoods,
infrastructure. A substantial increase in particularly for people on lower
productive investment is the only way incomes.
we can ensure our future prosperity in a
sustainable and inclusive way. Achieving these goals means
abandoning populist attempts to cut
The Irish Congress of Trade Unions taxes – such policies will help overheat
(Congress) advocates for a radical the economy and will actually harm
progressive vision for Ireland’s economy workers in the long run. Indeed,
and society. In this document, we we propose new taxes on capital,
outline a series of proposals for Budget particularly on wealth, in order to
2020 that will start us on the journey to raise money for productive social and
realising that vision. economic investment.
We will need to invest more in a wide Congress’s pre-budget submission will
range of different areas including help ensure that workers, particularly
in public housing, in healthcare, in those on low pay and the National
childcare and education, in clean Minimum Wage (NMW), and their
and renewable energy, and in public families, receive a fairer share of the
transport. Congress in particular has economic expansion now taking place,
called for a major, local authority-led and ensure support for the people who
public housing programme involving suffered more than most during the
the construction of at least 10,000 new crisis so they can live in a flourishing life
homes annually as part of the phased
of dignity.
introduction of a cost rental model
that provides stable affordable tenure
to all who need and want it. Public
housing policy must address the twin
goals of making affordable and secure
rental accommodation available to a Patricia King
significant share of the population, and GENERAL SECRETARY, CONGRESS4
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
1. Fiscal Context and Congress Position
The short-term outlook for the Irish economy is broadly positive,
although there are significant concerns in relation to Brexit and
the health of the global economy. The Department of Finance1
projects that the Irish economy (real GDP) will grow by 3.9% in
2019 and then by 3.3% in 2020. The Nevin Economic Research
Institute (NERI) agrees with the generally positive outlook, and
projects marginally stronger growth in both years (4% and 3.4%).2
There is an expectation that the cyclical upswing in the economy
will persist over the short-term, with higher levels of private
consumption and particularly strong growth in construction
related investment. However, the lack of clarity in relation to Brexit
means that much more uncertainty than usual hangs over the
economic outlook.
Employment increased by over 81,000 significantly, a structural surplus of
on an annual basis in the first quarter 0.1%.3 The implication is that the public
of 2019 and the NERI forecasts further finances are now in a structurally
strong employment growth over the sustainable position, notwithstanding
next year. The seasonally adjusted Ireland’s still high public debt ratio. The
unemployment was 4.5% in June and average interest on the Government
the rate should decline down to around debt is a sustainable 2.3%.
4% over the next 18 months. As the
labour market tightens, we should see Public Spending and the Public
increasingly strong growth in average Finances
hourly earnings. While average hourly Ireland’s level of public spending, as
earnings increased by just 2.3% annually a percentage of GDP, is very low by
in the first quarter of 2019, the NERI European Union (EU) standards.4 The
projects growth of between 3% and 3.5% difference is not as pronounced when
over the next 12 months. using the CSO’s variant output measure
called modified GNI, or GNI*. Even so,
The public finances are steadily comparing Ireland on this basis to the
improving. The Department of Finance EU average suggests a public spending
projects a budgetary surplus of 0.2% gap (i.e. an under-spend) of €5.6 billion in
of GDP in 2019 and, perhaps more 2017.5
1 Department of Finance (2019) Stability Programme Update, April.
2 NERI (2019) Quarterly Economic Observer: Summer 2019, July.
3 The structural balance takes into account the cyclical position of the economy and is, at least in theory, an indicator of
the sustainability of the fiscal position. We cannot observe the structural balance directly. Estimating it requires a methodology
and series of judgement calls concerning the extent to which the economy is operating below its potential or overheating.
The Department’s estimate is consistent with that of an economy that is very marginally overheating by the end of 2019.
4 GDP based comparisons of public spending are problematic given the issues around the use of GDP as a measure of
economic activity and fiscal capacity in Ireland.
5 See NERI (2019): Submission to Budgetary Oversight Committee, May 2019.5
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
The NERI estimate that per capita public Congress has repeatedly pointed out
spending (excluding debt repayments) that the low level of spending in Ireland
in Ireland was 2nd lowest (€15,791) has significant negative implications for
within the EU’s group of 10 rich ‘peer the future provision and quality of public
countries’, which includes Austria, services and infrastructure, and has
Belgium, Denmark, Finland, France, similarly negative implications for the
Germany, the Netherlands, Sweden, and future sufficiency of welfare payments
the UK, in 2018 and just 89.1% of the given the increasing demands of an
group’s population weighted average ageing population.
(€17,725). The gap scaled to Ireland’s
population was €9.4 billion. Clearly, Congress’s position is that the level
Ireland has a very low level of public of public spending is manifestly
spending per person compared to that inadequate when set within the context
of the other peer EU countries. of the ongoing crises in housing and
health, the cost of early years care
Furthermore, additional public spending and education, the chronic per-
is required each year in order to account pupil underfunding of education, the
for ‘stand-still’ costs related to changing underfunding of public transport,
prices and changing demographics and the need to reverse austerity era
such as ageing and population growth. cutbacks. Congress therefore proposes
The Irish Fiscal Advisory Council (IFAC)6 that all the remaining budgetary or ‘net
estimate that such costs amount to €1.28 fiscal space’ for 2020 should go towards
billion in 2019 and €1.47 billion in 2020. increased public spending.
Table 1 Per capita public spending excluding interest payments in 2018, €bn
Rank Country Population (000’s) Total Per Capita (€)
1 Denmark 5,794.0 149.8 25,851
2 Sweden 10,175.2 230.6 22,658
3 Finland 5,516.2 122.1 22,129
4 Austria 8,844.0 180.8 20,444
5 Belgium 11,405.0 225.8 19,800
6 France 66,977.0 1,278.5 19,088
7 Netherlands 17,232.0 319.1 18,518
8 Germany 82,885.0 1,454.6 17,550
9 Ireland (ROI) 4,860.7 76.8 15,791
10 United Kingdom 66,466.0 918.4 13,817
Peer Weighted Average (PWA) 17,725
ROI as % PWA 89.1
Gap scaled to population (€bn) 9.4
Sources: AMECO (2019), NERI calculations
Notes: Rounding affects totals.
6 Irish Fiscal Advisory Council (2018): Stand-still Scenario, May 2018.6
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Some economic commentators Broad Proposals
express the view that Ireland should
Congress is proposing a number of
take a cautious approach to its public
measures on the revenue side:
finances in order to avoid overheating
the economy and build up fiscal
• Reforms to capital taxation and to the
buffers against the next crisis. Given
system of tax expenditures sufficient
the chronic under-spending in Ireland
to raise almost €500 million in 2020.
relative to other high-income countries
Specifically, Congress proposes the
in Europe, it is Congress’s view that
introduction of a net wealth tax, greater
if the Government wishes to avoid
tax contributions from inherited wealth,
overheating in the economy then it
as well as a review of the system of tax
should do so through raising taxes.
expenditures to eliminate unjustified or
overgenerous measures.
Irish receipts from taxes and social
contributions on a per person basis
• An increase in the rate of employers’
were 2nd lowest amongst the group
PRSI on the portion of incomes in
of 10 rich EU countries in 2017 – only
excess of €100,000, raising €150
the UK was lower. The notion that Irish
million annually. Increase PRSI
people experience high taxes is clearly a
contributions from self-employed
myth.
yielding €75m annually.
The 2019 Summer Economic Statement
• Increases to the excises on pollution
(SES) set out an indicative nominal
(e.g. diesel, cars, packaging and
budgetary package amounting to €2.8
single-use plastics) and on other
billion in 2020. The Department of
‘bads’ including tobacco and betting
Finance projects that such a package
sufficient to raise €200 million annually.
would lead to a budgetary surplus of
0.4% of GDP or €1.4 billion, in 2020. The In addition, Congress is proposing a
Department projects that this would series of new spending commitments.
lead to a structural deficit of 0.1% of This additional spending should
GDP given their expectation that the prioritise
economy will be overheating.
a. rebuilding our collective economic
Pre-commitments related to and social infrastructure;
demography, budgetary carryovers, b. moving the economy towards a ‘just
the public service agreement, capital transition’; and
spending, and funding reserves related c. raising the ‘social wage’ going to
to the National Broadband Plan and the workers in the form of collective early
National Children’s Hospital, mean that years care and education, education,
the unallocated amount available for health, transport, and housing services.
new spending under the Department’s
indicative scenario is €0.7 billion.7 We show the full set of proposed
measures in Table 2.
7 Department of Finance (2019) Summer Economic Statement, June.7
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Table 2: Congress Proposals for Budget 2020, €bn (Indicative)
Revenue (€) Expenditure (€)
Total 970 Total 2,970
Introduce a tax on Net Funding for provision of A rated public
375 830
Wealth and affordable housing (1st year)
Health: Implementation of health
Reforms to Capital
reforms, increase investment in primary
Acquisitions Tax and to the 100 600
and community health, and to implement
system of Tax Expenditures
Sláintecare
Raise employers’ PRSI Climate Emergency and Just Transition
to 13.75% on excess (1st year): greater funding for retrofitting;
of incomes above public transport; R&D/innovation funds
225 400
€100,000 and raise PRSI for green technology, and funds to
contributions for Class S support workers transitioning to a low
contributors carbon economy
Education/children: Increase social
Raise on-line betting tax 20 investment in early years care and 500
education (ECCE) and in education
Raise Excise tax on tobacco 50 Increase Overseas Development Aid 120
Raise Excise tax on diesel 165 Offset the loss of the transition pension 25
Increase social welfare payments,
Reintroduce tax relief for including reform of eligibility thresholds
-25 335
trade union subscriptions for the Working Family Payment
(formerly Family Income Supplement).
Raise VRT and Motor
Introduce a Brexit Adjustment Assistance
Tax on the most
50 Fund (a once-off payment contingent on 160
environmentally damaging
the occurrence of Brexit)8
cars
Introduce tax on packaging
10
and single-use plastics
8 As a once-off payment, this measure would not affect the structural deficit in future years.8
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
2. Supporting Workers and Families
Many people [in Ireland] have yet to reap the social benefits of
the economic upturn.
European Commission (February 2019)
The recovering economy is not 2007. And 6.7% were living in consistent
benefiting everyone equally. Wage poverty, i.e. were both at risk of poverty
growth over recent years has been and were experiencing enforced
relatively sluggish, with average hourly deprivation; this was well above the
earnings increasing by just 6.6% in the 4.2% recorded in 2008.
decade up to the first quarter of 2019.9
43% of Irish respondents describe rising
In 2017, the share of household prices, inflation and the cost of living as
disposable income of the richest 20% one of the most important issues facing
was 4.6 times higher than that of the them according to the most recent
poorest 20%, marking a slight increase Eurobarometer public opinion survey
from 4.4 in 2016 (i.e. a worsening of (European Commission, 2018). This was
inequality).10 The EU’s 2019 Social the fifth highest rate in the EU, and was
Scoreboard describes income inequality 12 percentage points above the Euro
as an issue ‘to watch’ (European area average.
Commission, 2019). This represents
deterioration from its 2018 assessment Raising the Minimum Wage
of Ireland’s relative performance. Despite the relative prosperity of the
Irish economy over recent years, low
The most recent CSO Survey of Income pay is widespread. Over one in five
and Living Conditions11 (2018) states employees is a low-wage earner,
that 15.7% of the population were at according to the most recent Eurostat
risk of poverty, or had an equivalised data - a low wage-earner being an
income of less than 60% of median employee earning less than two-thirds
incomes, in 2017. Furthermore, 18.8% the national median gross hourly
were experiencing enforced deprivation, earnings.
or were unable to afford two or more
of 11 deprivation indicators, such as an Congress has consistently campaigned
inability to replace worn out furniture or to achieve a Living Wage as the
to afford to have family or friends over minimum that all workers should earn.
for a drink or a meal once a month; this
was down from 21% in 2016 but still well The Living Wage Technical Group
above the rate of the 11.8% recorded in estimated the Living Wage at €12.30
9 The most recent CSO data for median earnings (the middle earner in the economy or sector), issued in February 2017 and
covering the period 2011-2014, indicated that mean earnings were approximately 26 per cent above median earnings in 2014
and that nearly two-thirds (64%) of workers were paid less than mean earners in that year.
10 European Commission (July 2019), Employment and Social Developments in Europe – Annual Review 2019
11 CSO (2018) Survey on Income and Living Conditions (SILC) 2017, 17 December 20189
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
an hour in July 2019 for a single adult The European Commission also
with no dependents working full- acknowledges the impact of increases in
time. However, the current National the NMW in tackling poverty14 (European
Minimum Wage (NMW), at €9.80 an Commission, 2019) while the OECD
hour for a single adult worker aged 20 recommends increasing the NMW in
and over, amounts to less than 80% order to tackle inequality.15 Raising the
of the recommended Living Wage. NMW would help address the issue of
Approximately 1 in 13 workers earned continued subsidisation of corporate
the NMW (or less) at the end of 2018.12 profits, i.e. ‘corporate welfare’; the
Government estimates expenditure on
Ireland is committed under the the Working Family Payment, or WFP
Sustainable Development Goals to (formerly Family Income Support) at
promoting decent work (i.e. SDG 8) approximately €430 million in 2018,
and to reducing inequality (i.e. SDG pointing out that the WFP is currently
10). The new OECD Jobs Strategy paid to almost 54,000 families in
(2018) points out that minimum wages respect of some 122,000 children.16
ensure fair pay, prevent exploitation of Furthermore, there were approximately
workers, boost compliance with taxes, 38,100 casual and part-time workers
make work pay, and anchor wage- on the Live Register in receipt of the
bargaining, in particular for workers with Jobseeker’s Benefit or Jobseeker’s
a weak bargaining position. Recent ESRI Allowance in June 2019, representing
research commissioned by the Low Pay one in five of the 190,100 on the Live
Commission found that the increase Register in that month.17
in the NMW in 2016 - the first real rise
in nearly a decade - was effective in
increasing the wages of low-paid workers
and in reducing hourly wage inequality.13
Proposal – Align the NMW
with the Living Wage as soon
as possible.
12 CSO (2019) LFS National Minimum Wage Estimates, 26 April.
13 ESRI (2019), The Impact of a Change in the National Minimum on the Distribution of Hourly Wages and Household
Income in Ireland.
14 European Commission (February 2019), Country Report Ireland
15 Contribution by Chiara Criscuolo, Senior Economist, Structural Policy Division, Science Technology and Innovation
Directorate, OECD, at the Department of Finance Sixth Annual Policy Conference, 30 April 2019.
16 Written answer to written question no.14740/19, 2 April 2019.
17 Live Register, CSO statistical release, 04 July 2019. The Live Register is not designed to measure unemployment and
includes part-time workers (those who work up to three days a week), seasonal and casual workers entitled to the Jobseeker’
Benefit or Jobseeker’s Allowance.10
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Enhancing the Social Wage The state simply does not collect
enough through social insurance and
Alongside the direct wage, the ‘social
through general taxation to provide
wage’, i.e. employers’ social security
the public services that people in peer
contributions (PRSI), forms part of an
European countries can rely on. Per
employee’s compensation package. This
capita public spending in Ireland is
enables workers to access particular
consequently below average compared
services (e.g. health and early years care
to these countries.20 The underfunding
and education) for free or at below-
of public services is reflected in low
market prices and provides income
levels of satisfaction with public services,
support at times of particular life changes,
particularly when compared to peer
e.g. the birth of a child, a period of
countries.21
illness or unemployment, disability or
old age etc. Employers’ social security
Congress reiterates its proposal from
contributions are much lower in Ireland
our pre-budget 2019 submission for an
compared to peer European countries,
increase in employers’ PRSI to 13.75% on
as acknowledged by the Government.18
the excess of incomes above €100,000,
The Government has estimated that a 1
which we estimate could raise €150
percentage point increase in employers’
million.
PRSI could yield €778.6 million in a full
year.19
Table 3 - Employers’ Social Contributions in selected EU Member States
GDP (%) EU-28 ranking (2016)
EU-28 6.8 -
EA-19 7.9 -
France 11.2 1
Finland 8.7 4
Germany 6.6 12
UK 3.7 24
Ireland 3.7 (GNI*) 25
Source – Low Pay Commission
Proposal - Raise employer’s
PRSI to 13.75% on excess of
incomes above €100,000
18 ICTU (2018) Congress Pre-Budget Submission Budget 2019 – Investing in our Shared Future
19 Written answer to Dáil written question 45189/18, 6 November 2018.
20 Goldrick-Kelly, P. and McDonnell, T. Taxation and Revenue Sufficiency in the Republic of Ireland, NERI Working Paper No
48, October 2017.
21 European Commission (December 2018). Standard Eurobarometer 90 Annex: Public opinion in the European Union11
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Ensuring Social Security households with children aged 12 and
older (VPSJ, 2019).23 Congress therefore
Certain groups are more at risk of poverty,
calls on additional welfare measures for
or of experiencing enforced deprivation
such households, such as an increase
than the population as a whole. This
in the Qualified Child Increase (QCI) for
includes people not working due to illness
children aged 12 and over.
or disability, people who are unemployed,
people living in households with one adult
Congress also calls on the Government
and one or more children, and people
to reverse the most regressive cuts
living in households where there is no
imposed during the crisis years, such as
person at work.
the cuts to the Jobseekers Allowance for
young people and the changes to the
Congress has previously called on the
One Parent Family Payment, and to give
Government to increase all welfare
the Christmas bonus to all social welfare
payment rates by at least a higher
recipients, i.e. long-term and short-term.
percentage than expected inflation in
the following year.22 Congress reiterates
The Government should also consider
this call for Budget 2020.
the impact of Brexit, particularly a no-
deal Brexit, on wages and prices when
In addition, Congress recommends
considering social welfare rates. The
additional measures for groups more
ESRI for example estimates that cost
at risk than the population at large. The
increases arising from a no-deal Brexit
Vincentian Partnership for Social Justice
(e.g. in food prices) could result in the
estimates that households that suffer
lowest income households experiencing
from ‘deep income inadequacy’, or have
a 4% increase in average annual
an income that meets no more than 90%
household expenditure (ESRI, 2018).
of their minimum essential standard of
living costs in 2019, are now exclusively
Finally, all payments increased should
found in households that are headed by
apply from 1 January 2020, not the end
one adult, i.e. single-working age adult
of March 2020, as was done in 2018 and
and lone parent households, or in
again this year.
Proposal – Increase social
welfare rates by an amount
greater than expected inflation
in 2020 with additional increases
for households more at risk,
reverse the most regressive cuts
imposed during the crisis, and
pay the Christmas bonus to all
social welfare recipients, long-
term and short-term
22 The Department of Finance projects that the personal consumption deflator, i.e. the increase in the price of consumption
goods, will be 1.6% in 2020 (Department of Finance, Stability Programme Update, April 2019).
23 Vincentian Partnership for Social Justice (2019) Minimum Essential Standard of Living 2019 Update Report12
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Pensions pension policy does not recognise the
young age at which many workers,
Congress has previously expressed
particularly manual workers, enter the
its concern for workers who are
labour market.
compelled to continue working arising
from the planned increase in State
Congress has repeatedly called for an
pension age in 2021 and in 2028. Many
increase in social welfare payments
workers, particularly those in manual
by an amount that would offset the
occupations, are unlikely to be able to
cost of the abolition of the Transitional
extend their working lives as required
Pension, at an estimated cost of €25
by these changes. Despite having one
million. This affects a small number
of the youngest populations, Ireland is
of workers each year but more will
currently on course to have the highest
be affected by this measure as we
pension qualifying age in advanced
increase the pension age in two years’
economies in less than a decade. Unlike
time.
many of these countries, Ireland’s
Proposals - Lower the
contributory pension
qualifying age for workers
who entered employment at
a young age and have had a
long working life. Increase
social welfare payments by an
amount equivalent to offset the
abolition of the Transitional
Pension13
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Extension of Social Welfare should be proportionate to the benefits
Benefits to the Self-Employed they receive. This is crucial given the
findings of the 2017 KPMG Actuarial
Congress previously called on the
Review of the Social Insurance Fund
Government to begin the process or
which warned that that Exchequer
raising PRSI contributions for Class S
subventions will need to increase in
contributors24 to bring them closer
2017 real price terms (from nil in 2017)
into line with the costs of the benefits
to €1.7 billion by 2025, €5.6 billion by
they receive and stand to gain under
2035 and €11.4 billion by 2045.26 The
any extension of benefits to such
European Commission also warns that
contributors.
an increase in self-employment, with
little connection to social insurance
Historically, the fact that the Class S
schemes, may put these systems under
contributors, who can avail of many
strain, aggravating the challenges
expense offsets not available to the
associated with ageing.27
PAYE sector, did not have access
to the full range of social welfare
These measures are in addition to
payments justified their lower rate of
the commitment under the current
PRSI contributions. This is increasingly
Programme for Government to increase
no longer the case. Even before the
the Earned Income Tax Credit from
introduction of the new Jobseeker’s
€550 to €1,650 for the self-employed,
Benefit (Self-Employed) and other
to match the PAYE credit (by 2018);
benefits extended through Budgets
the earned income credit for the self-
2018 and 2019, the Department
employed currently stands at €1,350,
of Employment Affairs and Social
having been increased by €200 in
Protection. Tax Strategy Group - Pay
Budget 2019.
Related Social Insurance (July 2018)
pointed out that self-employed workers
Furthermore, there are also control
now have access to around 80%, in
issues in relation to Class S claimants.
value terms, of the benefits paid by the
For example, the 2017 KPMG Actuarial
Social Insurance Fund while making
Review points out that in its projections of
an effective contribution of 3.7% of
additional expenditure to Class S, it could
earnings. At 3.7% the effective rate
not make an ‘explicit allowance for any
of social insurance paid in respect
potential moral hazard associated with
of self-employed people is around
Class S self-assessing themselves as unfit
28% of that paid in respect of other
for work (due to the degree of uncertainty
workers (effective rate of 13%) and just
associated with this variable).28
24% of that required to cover pension
entitlements alone (15.5%).25 Overall the
Congress believes that many self-
contribution rate the self-employed pay
employed workers would be willing to
24 Class S contributors include farmers, professionals, certain company directors, people in business on their own or in
partnerships, people with income from investments, rents or maintenance payments etc.
25 Department of Employment Affairs and Social Protection. Tax Strategy Group - Pay Related Social Insurance (July 2018)
26 KPMG (2017) Actuarial Review of the Social Insurance Fund, p.6
27 European Commission (2018) Employment and Social Developments in Europe Annual Review 2018.
28 KPMG (2017) Actuarial Review of the Social Insurance Fund, p.14614
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
pay higher contributions to access the
full range of social welfare payments. In
the 2016 Department of Employment
Affairs and Social Protection survey of
self-employed people, nearly 90% of
all respondents said that they would be
willing to pay a higher social insurance
contribution in return for additional
benefits. A 0.5 percentage point increase
in the self-employed 4 per cent PRSI
rate alone would yield €77.5 million per
annum.29
Congress is aware that the Government
has promised a public consultation
on appropriate PRSI contribution
rates. Congress will respond to this
consultation when it is announced. In
the meantime, Budget 2020 should
begin the process of increasing PRSI
contributions for Class S contributors in
order to bring them closer to the costs
of the benefits they receive and stand to
gain under any extension of benefits to
such contributors.
Proposal - Begin the process of
increasing PRSI contributions
for Class S contributors in order
to bring them closer to the costs
of the benefits they receive
and stand to gain under any
extension of benefits to such
contributors.
29 Department of Finance (2017), Tax Strategy Group 04/17 Pay Related Social Insurance – Budget 2018 Issues15
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Bogus Self-Employment – Lost Citing Revenue estimates, they
Revenue to the State conclude that if it is assumed that half
of the 15,000 people employed under
personal service company (PSC) and
“The one thing I can safely managed service company (MSC)
say is that we are all in arrangements are ‘effectively in the
agreement regarding the nature of a contract of service’ then
fact that there are people in the estimated loss to the Exchequer
this country who are made would be in the order of €60 million per
annum and that the bulk of the potential
bogusly self-employed loss - 70% and upwards - is attributable
through no fault or to the differential in social insurance
acquiescence on their part.” (PRSI) rates.31 We would argue that the
Regina Doherty TD, Minister for estimated cost of such arrangements
Employment Affairs and Social to the Exchequer is substantially higher.
Protection, 19 December 2018 For example, bogus self-employment in
the construction sector alone could be
The Comptroller and Auditor General costing the State at least €240 million a
has concluded that the absence of year.32
an employer contribution for Class
S contributors creates an economic
incentive for certain individuals to be
improperly treated as self-employed.30
The Departments of Finance and
of Employment Affairs and Social
Protection have said that while it is not
possible to be definitive on the overall
cost to the Exchequer of the use of
such forms of employment, ‘the data
indicates an increasing use of self-
employment arrangements in some
sectors (notably finance and ICT) and
also that the estimated cost to the
Exchequer of disguised employment
practices may not be insignificant’.
30 Comptroller and Auditor General (2018), Annual Report 2017, Chapter 20 PRSI contributions by the self-employed
31 Department of Finance and Department of Employment Affairs and Social Protection (January 2018), The use of
intermediary-type structures and self-employment arrangements: Implications for Social Insurance and Tax Revenues.
32 See Joint Oireachtas Committee on Social Protection discussion on bogus self-employment, 31 January 2019. Connect
estimates the cost at €300 million a year - The Irish Times, 6 October 201816
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Encouraging Collective been abolished (OECD, 2018:102).
Bargaining and Trade Union Under Sustainable Development Goal
Membership 8.8, Ireland is committed to protecting
labour rights and to promoting safe and
Congress has previously called for the
secure working environments for all
re-introduction of the scheme in place
workers, including migrant workers, in
between 2001 and 2011 that provided tax
particular women migrants, and those in
relief to workers who are members of a
precarious employment.
trade union. At its peak, this scheme cost
approximately €27 million a year. The
The Department of Finance has
re-introduction of this scheme would
previously stated that the only apparent
end the discriminatory treatment of trade
objective the reintroduction of this
union members compared to members
measure would serve would be to
of professional bodies, of expenses
incentivise trade union membership.
incurred by the self-employed, and even
Given international research findings
of subscriptions to specialist publications.
– e.g., by the OECD, the World Bank
and the IMF - of the positive role trade
The OECD Employment Outlook
unions play in tackling inequality - this is
2018 has pointed out that countries it
a reason enough in itself.
now recognises as having collective
bargaining systems that produce the
best outcomes, in terms of productivity,
employment rates, wages, working
conditions and inequality, use fiscal
incentives to promote trade union
membership (e.g. Norway and Sweden),
with some of these reintroducing or
extending schemes that had previously
Proposal – Reintroduce the
scheme in place between 2001
and 2011 in respect of trade
union subscriptions. Maximum
cost: €27 million.17
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Maintaining the Flat Rate The Departments of Finance and
Expenses System of Employment Affairs and Social
Protection have also highlighted the
Revenue is currently in the process of
implications of bogus self-employment
reviewing the Flat Rate Expenses system.
for the Social Insurance Fund and for
This system enables employees to claim
tax revenues.34 Congress argues that
tax relief on work-related expenses.
any moves to abolish or restrict this
system will be perceived as a wholly
The total cost of this system was
unfair attack on workers, particularly
approximately €77 million in 2017.
those on low incomes, at a time when
Congress would contrast the focus
other tax-payers, including corporate
on this particular measure with the
tax-payers, are continuing to receive
apparent lack of attention being
wholly disproportionate benefits from
given to other, costlier measures. For
tax expenditures that do not seem to be
example, the 2018 Comptroller and
subject to similar review, and at a time
Auditor General’s report on corporation
when it has refused to re-introduce the
tax losses has drawn attention to the
scheme that operated between 2001
issue of corporation tax losses and
and 2011 in respect of tax relief for trade
unused capital allowances33, while
union subscriptions (see above).
the Oireachtas Committee of Public
Accounts has expressly recommended
that Revenue put in place procedures
to oversee losses carried forward in
order to identify those relating to trading
losses and those relating to unused
capital allowances.
Proposal – Maintain the
current Flat Rate Expenses
System.
33 Comptroller and Auditor General (2018), Corporation Tax Losses
34 Department of Finance and Department of Employment Affairs and Social Protection (2018), The use of intermediary-
type structures and self-employment arrangements: implications for Social Insurance and Tax Revenues18
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Brexit – Maximising Sustainable Congress’s paper on the implications
Employment of a no-deal Brexit called for three new
measures, in addition to the measures
As Congress warned in our Briefing
already put in place.
Paper, The Implications of a No-Deal
Brexit (2019), the risk of a no-deal Brexit
• First, the establishment of a short-
has increased since the start of this year.
time work scheme, as Congress
previously recommended in our
The ESRI (2019) has estimated that the
response to the post-2008 crash and
short-run impact (i.e. within two years)
as now recommended in the OECD’s
of the UK crashing out without a deal
new Jobs Strategy (2018).35
could be GDP growth up to 2.4% lower,
employment levels up to 0.8% lower and
• Second, the establishment of a
real average wages up to 0.5% lower,
Brexit Adjustment Assistance Fund
compared to what they would be if
to support workers whose jobs are
the UK remains within the EU. These
most at risk. This new instrument
scenarios are entirely possible if the UK
could be modelled on the European
leaves on a no deal basis at the end of
Globalisation Adjustment Fund, which
October 2019 (see Table 4).
has funded support to approximately
11,000 workers in Ireland between
Similarly, the Department of Finance
2007 and 2016, at a total cost of
early this year warned that under a no-
approximately €75 million. It could
deal scenario, the general Government
also build on initiatives in other
balance would worsen this year from
countries that are designed to
broad balance to a deficit of 0.3% and
anticipate and manage change;
from a forecast surplus of 0.3% to a
the OECD for example highlights
deficit of 0.5% in 2020.
the effectiveness of Sweden’s Job
Security Councils, which are run by
unions and employers.36
Table 4 - Estimated short-run impact of Brexit on Ireland (after 2 years) compared to ‘No Brexit’
baseline37
Deal No Deal Disorderly
GDP -0.6 -1.2 -2.4
Employment -0.1 -0.1 -0.8
Average wages, real -0.1 -0.3 -0.5
Source – Department of Finance/ESRI (2019)
35 OECD (2018a), Jobs Strategy
36 OECD (2018), Going Digital in a Multilateral World.
37 The DoF/ESRI defined the Deal scenario as the UK making an orderly agreed exit from the EU, involving a transition
period covering the years 2019 and 2020, and a free trade agreement between the UK and the EU-27 thereafter. It also said
the Deal scenario is based on the Withdrawal Agreement and was ‘broadly consistent with a short extension of Article 50’. It
defined the No-Deal scenario as the UK exiting without a deal but there would be ‘an orderly period of adjustment for trade’.
Ultimately, WTO tariff arrangements would apply to goods, there would be non-tariff measures, and services trade would also
be negatively impacted. And it defined a Disorderly No-Deal as the UK exiting without a deal and with additional disruption to
trade in the short-run, above that considered in the No-Deal scenario.19 Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future • Third, the revision of the EU rules establishing the European Globalisation Adjustment Fund for the 2021-2027 period, so as to allow it explicitly support workers made redundant because of Brexit. The European Parliament proposed such an amendment earlier this year and this is currently being considered by EU Governments. Proposal – Establish a Short- Time Work Scheme and a Brexit Adjustment Assistance Fund to maximise sustainable employment and amend the European Globalisation Adjustment Fund to allow it to support workers made redundant because of Brexit.
20
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Investment in Public Housing guidance’ (i.e. Annex D) for EU cohesion
policy funding over 2021-27, identifies
Hundreds of thousands of people are
further investment needs in social
being affected by the housing and
housing in order to prevent and reduce
homeless crisis. Unfortunately, Budget
homelessness and housing exclusion
2019 failed to address the housing crisis
over this period. Congress again urges the
in any meaningful way. Proper housing
Government to prioritise the construction
solutions mean building real homes,
of public housing, including social and
not continuing to expand the Housing
affordable housing, the enhancement of
Assistance Payment (HAP) or the Rental
services aimed at supporting homeless
Accommodation Scheme (RAS). The
people and those at risk of homelessness,
Government’s developer-led model of
the use of vacant homes and sites, and
housing continues to fail. More direct
more rapid progress towards a cost-rental
action is required from the Government.
system.39
The European Commission’s 2019
Congress calls for a major, local
Country Report38 now takes a similar
authority-led public housing programme,
view: it warns that the HAP and RAS
involving the construction of at least
risk ‘exacerbating rent increases in the
10,000 new homes annually, as part of
already supply-constrained private rental
the phased introduction of a cost rental
market’ (p.9); it cites 2018 research by the
model that provides stable affordable
Department of Public Expenditure and
tenure to all who need and want it. Public
Reform to point out that ‘expenditure
housing policy must address the twin
levels on housing and social housing,
goals of making affordable and secure
though growing, still stand at a level
rental accommodation available to a
just below the 2008 peak, thus further
significant share of the population, and
contributing to the critical situation’
increasing the stock of homes in well-
(p.38, emphasis added); it says that
designed, sustainable neighbourhoods,
the homelessness crisis ‘merits urgent
particularly for people on lower incomes.
action’ (p.35) and that investment in
social housing is ‘crucial to address the
severe social housing shortages and rising
homelessness…’ (p.38); and its ‘investment
Proposal – Provide additional
funding for public housing in
Budget 2020, above what is
already committed.
38 European Commission (February 2019), Country Report Ireland.
39 The EU’s country specific recommendations to Ireland for 2019/2020 (adopted on 12 July) now states (paragraph 16) ‘the
very limited amount of affordable and cost-rental accommodation are factors further aggravating the situation’; the issue of
cost-rental was not addressed in the 2019 Country Report.21
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Investment in Health the original vision of universal entitlement,
and investment needs remain in order
Ireland’s health system faces many
to shift focus to primary and community
challenges, challenges that are
care’ (emphasis added). Congress does
compounded by an ageing population. A
not believe that this conclusion has been
central objective must be to keep people
sufficiently acknowledged or addressed
out of hospital and long-term care,
by the Government in Ireland’s National
wherever possible, by investing in quality
Reform Programme (NRP) 2019. Nor do
community health care, as well as in
we believe that the NRP 2019 responds
health education and early diagnosis.
to the Country Report’s findings that
‘the perverse incentives generated
We need to make more rapid progress
by the coexistence of a public and
towards an adequately-funded, publicly-
private insurance market should also be
controlled and universally-accessible
addressed to avoid preferential treatment
single-tier health service, as outlined
of privately-insured patients in publicly-
by the Sláintecare report. Health will
funded hospitals.’
require major investment over the
coming years to deliver this goal and to
The EU’s country specific
deal with demographic change.
recommendations for 2019/2020 again
recommend (i.e. CSR II) that Ireland
The Sláintecare report explicitly
increase the cost-effectiveness of the
recommended a move towards a multi-
healthcare system. The Congress pre-
annual budgeting process (of 3-5)
budget 2019 submission drew attention
years, to be phased in over the next 10
to the over-spend on ‘medical products,
years, in order to ‘help preserve funding
appliances and equipment’ and on ‘health
stability and to increase predictability’.
n.e.c.’ in Ireland compared to other high-
The Sláintecare Action Plan 2019 (March
income western European countries, as
2019) included a commitment to ‘set
previously identified by the NERI. Given
out [a] policy proposal for multi-annual
that the 2019 Country Report concludes
budgeting’ and to ‘establish and resource
that limited progress has been made on
[a] multi-annual Transition Fund’, both to
this particular recommendation (p.58), we
be achieved by the end of 2019.
would urge the Government to revisit the
The European Commission’s relevant recommendation from our pre-
2019 Country Report stated that budget 2019 submission.
‘implementation challenges to realising
Proposal – Provide additional
funding for primary and
community care and to
implement Sláintecare.22
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Investment in Long-term Care and businesses where a family successor
continues to operate the farm or
The European Commission’s 2019
business for at least six years. Congress
Country Report for Ireland estimates
is concerned that whereas the current
that as a result of demographic changes,
Programme for Government (p.84)
expenditure on long-term care is
committed to changing the treatment of
expected to increase by 1.9 percentage
‘family farms and small business’ (which
points of GDP from 2016 to 2070, above
were not defined), the General Scheme
the EU average of 1.2 pp over this period.
appears to cover a much broader range
The Nursing Homes Support Scheme
of businesses; this could further raise the
(the ‘Fair Deal’ scheme), is a system of
‘upwards of €10 million’ estimated annual
financial supports for people who require
cost of this measure.
long-term residential care (public, private
or voluntary). Participants contribute to
In addition, the European Commission’s
the cost of their care according to their
2019 Country Report points out that there
means (i.e. up to 80% of their income and
is currently no statutory entitlement to
up to 7.5% of the value of any assets each
formal home care, with long waiting lists
year, with the 7.5% annual contribution
and Government plans to introduce a
from the asset value of the family home
statutory scheme having been delayed,
charged for three years only) and the State
and states that investing in a ‘more
paying the balance. The Government
developed formal home care sector’
estimates the budget for long-term
could help reduce exchequer costs for
residential care at €962 million in 2018,
long-term care’.41 The Government’s
rising to €986 million in 2019.40
Stability Programme Update (2019)
merely states that a ‘significant amount
On 11 June 2019, the Government
of preparatory work remains to be
approved the General Scheme of a Bill to
undertaken’, and refers to the fact that
change the treatment of family farms and
the Department of Health’s Sláintecare
businesses under Fair Deal. This proposes
Implementation Strategy (2018) commits
to extend the three-year cap to farms
to the introduction of a statutory scheme
in 2021.
Proposal – Undertake a
thorough analysis of the
impact of the proposed
changes of the treatment of
family farms and businesses
under the Fair Deal scheme;
speed up the introduction of a
statutory home care scheme.
40 Written answer to Dail written question no.20318/19, 14 May 2019.
41 The European Commission’s Joint Report on Health Care and Long-Term Care Systems and Financial Sustainability (June
2019) also points out that the last few years have seen ‘a sharp increase in private providers of home care’ in Ireland, that there
is no official register of private and not-for-profit home care companies but that it is estimated that that currently there are in
excess of 130 such providers (including franchises), reflecting a decline in informal care ‘and a significant increase in the HSE
budget allocation to home care services’ (p.389).23
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Investment in Early Years Care acts as a barrier to paid employment,
and Education particularly in low-income households,
including single parents, thus reducing
Human beings make the greatest
income among the families that need it
strides in their development during
most. This has a negative effect on female
early childhood and the ability to learn
employment and participation rates
will never again be as great as it is in
and leads to a loss of high quality skills,
these years. Thus, policies that improve
experience and knowledge within the
early learning have a positive effect
workforce.
on later educational attainment and,
consequently, the attendant benefits that
Public investment in early years care
this brings. Sustainable Development
and education in Ireland should be
Goal 4.2 commits Ireland to ensuring that
increased over the next four years to – at
by 2030, all girls and boys have access
a minimum - the OECD average (i.e. 0.7%
to quality early childhood development,
of GDP43) and - again at minimum - to
care and pre-primary education so that
at least the UNICEF benchmark of 1%
they are ready for primary education.
of GDP by 2027. Over the longer term,
Ireland should aim to match the best
Congress’s pre-budget 2019 submission
performing countries such as Iceland,
highlighted the importance of expanding
Sweden and Denmark (all above or near
public provision of high quality, subsidised
1.5% of GDP).
early years care and education (ECCE)
services, as again recommended by the
EU’s country specific recommendations
for 2019/2020.42
Proposal – Provide additional
The European Commission’s Country funding for affordable quality
Report for 2019 again finds that the
early years care and education
insufficient provision of childcare is the
main cause of high female inactivity services.
(p.34); that formal childcare remains
unaffordable for many (p.35); and
that Irish childcare costs are the most
expensive in the EU (p.36). Irish childcare
costs in 2015, relative to wages, were the
highest in the EU for lone parents and
the second highest for couples while
the average family in Ireland spends over
one-third of their household income on
childcare – twice the European average.
The very high cost of childcare in Ireland
42 Congress is concerned that whereas the country specific recommendations for 2018/2019 urged Ireland to ‘Ensure the
timely and effective implementation of the National Development Plan, including in terms of…affordable quality childcare,
the country specific recommendations for 2019/2020 urge Ireland to ‘Increase access to affordable and quality childcare’
(emphasis added).
43 Or GNI* in the case of Ireland.24
Congress Pre-Budget Submission Budget 2020 – Building a Shared and Sustainable Future
Investment in Education that while all students benefit from
small class sizes in the early grades,
Education spending falls short of what
students from disadvantaged and
is needed to live in today’s rapidly
minority backgrounds benefit most and
changing world and to equip children
schools in the DEIS programme have
and young people with the skills for the
not benefited from general class size
workplaces of the future. Sustainable
reductions in recent years.45
Development Goal 4 commits Ireland
to ensure inclusive and equitable quality
Research by the OECD illustrates that
education and to promote lifelong
class sizes in Ireland remain well above
learning opportunities for all.
international norms. For example,
primary school classes contain on
Research by the NERI has found that
average five pupils more than classes in
public investment in Ireland has been
the EU-22 Member States (25 compared
particularly low on a per student basis
to 20), and the second highest, after the
for education, including in primary
UK, of peer European countries.46
education and lower secondary
education.
Congress welcomes the fact that Ireland
has achieved its Europe 2020 early
Investment per pupil/student should
school leaving target. Ireland, however,
increase in real terms to at least the
still has a higher than EU average early
average of other high-income western
school leaving rates for people with
European countries. For example, the
disabilities and one of the widest early
OECD’s most recent Education at a
school leaving gaps between people
Glance report shows the disparity that
with and without disabilities.
currently exits. This indicates that that
total expenditure on Irish primary schools
The 2019 Social Scoreboard also
per pupil in 2016 was below both the
identifies the low level of basic digital
OECD average and an EU-22 average,
skills among the adult population as
with Ireland coming in 18th place of the
an issue ‘to watch’. 52% of the adult
33 OECD countries as well as the lowest
population lack even basic digital
of peer European countries.44
skills, compared to an EU average of
43%. In response, the Government has
Budget 2020 should prioritise increased
highlighted last year’s launch of the
investment in education, particularly
EXPLORE Programme, which seeks
in the DEIS programme and to further
to address this issue and other issues
reduce the number of young people not
relating to Lifelong Learning, but
in employment, education and training
Congress would argue that much more
(NEETs). Research consistently indicates
is required.
44 OECD (September 2018), Education at a Glance 2018, Table C1.1, p.254. EU member states not covered were Bulgaria,
Croatia, Cyprus, Lithuania, Malta and Romania. No data for Denmark.
45 Weir, Kavanagh, Kelleher & Moran, 2017, Addressing Educational Disadvantage – A Review of Evidence from the
International Literature and of Strategy in Ireland: An Update since 2005.
46 OECD (September 2018), Education at a Glance 2018, Table D2.1, p.357You can also read
